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Business Loans FAQ

Business loans are a form of finance designed for companies in need of financial capital, whether they need the money to make their entrepreneurial ideas a reality, or to expand the next stage of their operations. These loans can range anywhere from a few thousand to hundreds of thousands of pounds.

Business loans are available in both secured, and unsecured terms. While unsecured options allow for more peace of mind within the business, as you're not borrowing against the assets of your company, secured loans generally permit lower interest rates and cheaper financing solutions for organisations with tight budgets. There are also short-term and long-term business loans to choose from depending on your company's specific needs.

Below are some of the most frequently asked basic questions about business loans.

Who are business loans for?

Business loans exist as an option for almost any kind of business - regardless of how big or small that company may be. Though business finance is usually required by limited companies, it can also be a requirement for small, sole-traders too.

To apply, you need only be a UK-resident, aged 18 or older, and not currently bankrupt or taking part in a debt arrangement scheme.

Where can I get a business loan?

Commonly, business loans are provided by banks. Many companies will talk to the bank that they conduct their day to day business with as a first port of call before enquiring with other providers. Comparing and contrasting different lenders will help you to get the best deal.

Do business loans require credit checks?

Yes. All business loans will require a credit check. Though credit checks won't necessarily be carried out on the shareholders or directors of the business, banks will still need to determine the ability of a business to make repayments, and therefore your company's credit check will impact the terms and interest rates that you are offered.

For established businesses, it is the company's records that are the focus of attention. However, some lenders will check the personal credit rating of the owners too, particularly in the case of a start-up business which does not yet have any financial history.

What is a Start-Up Loan?

A Start-Up Loan is a type of business loan that can be used to help you get your business off the ground. This type of loan is given for the purpose of business, and applications are considered according to the needs of the company in question.

Should I get a long-term or short-term business loan?

The question of whether to get a long-term, medium-term, or short-term business loan can only be answered with a close consideration of your own personal circumstances. For instance, a medium to long-term business loan can help to offset some of the costs associated with starting a business, while keeping your monthly repayments low by spreading costs over a longer period of time.

Some businesses find that long-term loans are better for helping them get their business up off the ground.

On the other hand, short-term loans can help to reduce the amount of interest that you end up paying overall by speeding up repayment.

How much interest will I pay?

The amount of interest that you should expect to pay on a business loan will depend largely on your personal circumstances, as well as a number of factors, including how much you'd like to borrow, and the amount of time you would like to borrow the money for.

If your business is just starting out, then the lender you choose to work with will usually look at your personal credit rating for an indication of your responsibility in managing money as well as your business plans.

The higher your credit score is, the better chance you'll have of being offered a competitive rate of interest.